Reevely: Solution to premiers' health-spending woes is in their own hands

Ontario Premier Kathleen Wynne, left, and Prince Edward Island Premier Robert Ghiz shake hands at the closing news conference of the annual Council of the Federation meeting in Charlottetown on Friday, August 29, 2014.

The provincial premiers emerged from their annual meeting in Charlottetown Friday united, as they usually are, in their belief that the federal government needs to give them more money.

They have a study supporting them from the Conference Board of Canada, the economics think tank, which concludes that health spending is eating provincial budgets and can be expected to keep doing so. It’s a simple problem to describe: An aging population will both need more care and contribute less to the economy over the next 20 years, pinching provincial budgets from both directions.

“Without additional funding (either in the form of higher taxes or larger transfers from the federal government), the provinces and territories will be required to find significant annual productivity improvements to deliver health care at a pace that Canadians have come to expect,” the Conference Board says. “If efficiency gains lag, provincial and territorial governments will have to juggle the undesirable options of higher taxes, sharp cuts in other program spending, increased wait times, or the rationing of health care in order to balance the books.”

The premiers, in a joint statement, call this a “fiscal disparity.” The federal government has more money than they do and they face growing expenses.

“Since 2002 there have been six different reports on fiscal issues — and all have drawn the same conclusion, that provinces and territories face a future of ever increasing deficits while the federal government can see ever increasing surpluses,” said Prince Edward Island Premier Robert Ghiz, who chaired the conference.

Something, they all agreed, has to be done to “modernize” the relationship between the federal government and the provincial ones. Which is code for finding a way to take federal money and send it to them.

The thing is, the federal government does not have a magical well of cash to pull million-dollar bills from. It gets most of its money from taxes. And most of the taxes it levies are taxes the provinces could levy too, if they wanted to.

It’s right there in the Conference Board report: to keep things going roughly as they are, the provinces need more money. One solution is bigger transfers from the federal government. Another solution is for them to raise taxes.

Raising taxes is obviously not an appealing idea. Nobody likes paying higher taxes, so no politician wants to ask anybody to. Yet that’s pretty much what the premiers are demanding the federal government do. There is, to be fair, a subtle distinction: the premiers want the feds to keep federal taxes higher than necessary so the premiers don’t have to raise them. The effect at the end is the same, though.

Paul Martin, when he was prime minister, went into a meeting with the premiers in 2004 and found himself stripped of his shirt by the end, having agreed to increase federal transfers for health care by six per cent a year for 10 years. That deal expired this year, replaced by a unilateral declaration from Stephen Harper’s Conservatives (Harper doesn’t like to be mugged, Martin-style) that they’ll go for three more years and then clip the increase back to three per cent a year.

There’ll still be more money, but not as much more money as the provinces have gotten used to. If they want more, they’ll have to find it themselves. It’s not impossible: Dalton McGuinty’s “health premium,” the fat tax hike he imposed in 2004, is still in place. Access to health care has improved: more of us have family doctors and waiting times for key procedures have shortened. McGuinty was re-elected twice.

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